Chapter 11

Strategy and
National
Development
Strategic National Development
• Nation
– Is a community of people with similar or divergent beliefs, aspirations, and
traditions, living in the same geographic area.

• National Development
– Progress and growth, maturity, or simply improvement.

• Basic Components of Success:

– Structure
– Strategy
Structure
Refers to the operational framework that will serve as a basis for
national growth and development.
Without a structure, plans and development will be difficult to
actualize.
Three kinds of structure:
– Political Structure
– Economic Structure
– Institutional Structure
Political Structure

Refers to the political system existing in the country.

E.G
Democracy when social equality exists.
Autocracy when dictators rule a nation.
Communism when control is collective or socialist.
Economic Structure

Refers to how business is conducted in a nation.

Macro level
– This includes consumption, investment, trade, and government.

In some developed countries like Europe and the United States, consumption is
more than 50% of the gross domestic product while Japan’s trade in terms of
exports and imports is more than 100 percent of GDP.
Institutional Structure
Reflected in a country’s banking system, its justice system, military
powers, and the rule of law.
E.G
Financial systems need to be sound, the justice system should be fair and just,
police powers should not be abused, bureaucracies should be efficient and free
from corruption, labor unions should be reasonable, and management of
resources should be monitored and controlled.
Strategy
Nations need strategies to achieve national development.
Both structure and strategy should be aptly intercorrelated to
create a good fit.
All governments set goals. To achieve these goals, policies have to
be formulated and enforced.
In this way, order and efficient implementation of policies are
ensured.
Macro Policies

Macro policies of the government include fiscal policy,

monetary policy, policy on the exchange rate and
income policy.
Fiscal Policy
Fiscal policy of a government can be any of the
following:
– Balanced Budget
– Revenues are equal to expenditures
– Surplus
– Excess in budget
– Deficit
– Shortfall in budget
Monetary Policy

It is the other important complement of fiscal policy.

Monetary policies are set by the country’s central bank
to make possible the growth of the supply of money at a
given rate.
Policy on the Exchange Rate

Refers to the manner in which a country manages its currency in

respect to foreign currencies and the foreign exchange market.
The exchange rate is the rate at which the domestic currency can
be converted into a foreign currency. In turn, this affects the costs
of domestic production and finance relative to foreign products
and capital. In formulating exchange rate policy, a balance must
be found between several differing, and sometimes conflicting,
objectives.
Income Policy

In economics are economy-wide wage and price controls, most

commonly instituted as a response to inflation, and usually seeking
to establish wages and prices below free market level.
Micro Policies

Comprises policies directed to achieve improvements in economic

efficiency, either by eliminating or reducing distortions in individual
sectors of the economy or by reforming economy-wide policies
such as tax policy and competition policy with an emphasis on
economic efficiency, rather than other goals such as equity or
employment growth.
These micro policies include trade policy, policy on foreign
investments, policy on privatization or nationalization, economic
policy, competition policy and subsidy policy.
Trade Policy

Standards, goals, rules and regulations that pertain to trade

relations between countries. These policies are specific to each
country and are formulated by its public officials. Their aim is to
boost the nation’s international trade. A country’s trade policy
includes taxes imposed on import and export, inspection
regulations, and tariffs and quotas.
Policy on Foreign Investments
An investment policy is any government regulation or law that
encourages or discourages foreign investment in the local
economy, e.g. currency exchange limits.
The foreign exchange market is a global decentralized or over-the-
counter (OTC) market for the trading of currencies. This market
determines the foreign exchange rate. It includes all aspects of
buying, selling and exchanging currencies at current or
determined prices. In terms of trading volume, it is by far the largest
market in the world, followed by the Credit market.
Policy on Privatization or
Nationalization

Nationalization is the process of transforming private assets into

public assets by bringing them under the public ownership of a
national government or state. Nationalization usually refers to
private assets or assets owned by lower levels of government, such
as municipalities, being transferred to the state. The opposites of
nationalization are privatization and demutualization.
Economic Policy

The economic policy of governments covers the systems for setting

levels of taxation, government budgets, the money supply and
interest rates as well as the labour market, national ownership, and
many other areas of government interventions into the economy.
Competition Policy

Promotes or seeks to maintain market competition by regulating

anti-competitive conduct by companies. Competition law is
implemented through public and private enforcement.
Subsidy Policy

A form of financial aid or support extended to an economic sector

(or institution, business, or individual) generally with the aim of
promoting economic and social policy. Although commonly
extended from government, the term subsidy can relate to any
type of support – for example from NGOs or as implicit subsidies.
Subsidies come in various forms including: direct (cash grants,
interest-free loans) and indirect (tax breaks, insurance, low-interest
loans, accelerated depreciation, rent rebates).
Resources

Most supply of competitiveness. Oftentimes scarce, they can make

or unmake a nation or bring them to prosperity or dearth.
The resources in any nation include natural resources, human
resources, technology and capital.
Natural Resources

Consist of arable land, minerals, energy fuels, aside from aquatic

life and forestlands. These resources should be harnessed to give
people better life.
Human Resources

Include a population with adequate, if not the best, education

and are highly skilled and healthy. Likewise, the number of people
in a country can be positive and negative, positive in that there
are more hands to till the land, to perform work, and earn a living.
It is negative, in that it will mean having more mouths to feed, to
shelter, to educate and to spend on.
Technology

Research and development, advances in science,

communication, information technology, manufacturing, and
medicine, among others, significantly contribute to national
advancement.
Capital

If invested wisely, can generate more employment, provide a

better standard of living, and bring about an efficient exchange of
goods, services, and wealth.
Strategy Framework for National
Growth

A living example of strategy in national development is China. To

speed up its growth and provide an economically sound
government to its people, it has undertaken growth strategies for
national development. Successfully applied by other Asian
countries like Japan after second World War, Korea and Taiwan,
these phases in economic growth have proven to be successful
and advantageous to these nations. These growth strategies are
sequential, one-step moving to the next.
Phase 1: Imitation

After many decades of isolation from the world, China is

undergoing a rebirth. Wobbly and uncertain, the country has
taken an attitude and behavior of copying the products and
services of other nations. Books are reproduced and shoes and
bags are imitated while ships are dismantled and replicated.
Phase 2: Development

Since the goods and services are easily sild for their low prices,
more profits are generated. This increase in profits allow for
provisions for improvement. From being in a crude and
rudimentary stage, the products are slowly refined and enhanced.
Labor costs are still low, while the goods and services are better this
time. Prices are generally maintained. In this stage, more sales are
generated. After all, the goods are improved and sold at the same
prices.
Phase 3: Enhancement

Without enough capital, more investments are now set aside for
serious improvement. Better raw materials and equipment are
purchased while qualified workers are hired to undertake product
and service enhancement. In effect, finished goods now carry
better quality. They have become a little more expensive but still
affordable, if not cheaper in relation to the same products coming
from developed Western and Asian countries. Sales are still
generated.
Phase 4: Differentiation

Once a product or service is enhanced, serious competition

creeps in due to the increase in prices. Although the enhanced
goods are sold, the assurance for higher sales is not certain. Existing
products and services will have to be greatly improved. New or
differentiated features will have to be introduced, top-quality raw
materials have to be used, and highly efficient processes and
techniques have to be implemented to bring about more superior
and highly competitive goods.
Phase 5: Innovation

As products and services become significantly more expensive,

generating sales become challenging. To ensure continuous
business, innovation is the only alternative. Inventions are
undertaken through quality researches on product and service
development. The existence of very stiff competition is a given. All
nations encourage their organizations to be the first in any
untraded area.
Competitive Advantage of Nations

Competitive advantage is a superior position gained by an

organization in relation to its competitors. It happens when the
organization develops a feature or a combination of features that
allows it to outperform its competitors in a specific segment that is
adequately and competitively catered to compared to its
competitors, or when a company operates in a more efficient
high-quality way.
Macro Perspective

In macro or external perspective, competitive advantage was

expounded and analyzed by Michael Porter. Porter looked at
strategy from the point of view of a bigger social entity, a nation,
arguing that it could create new advanced factor endowments
such as skilled labor, strong technology and knowledge base,
government support and culture.
Micro Perspective

In a micro or internal perspective, competitive advantage refers to

an organization’s resources and capabilities that have strategic
value. This internal competitive advantage may be due to an
established superior product/ services features and quality,
outstanding people and services, very highly efficient processes
and operations, and low-best competitive pricing.
Conditions to Achieve Competitive
Advantage
a) The resources and capabilities of the organization are valuable,
unique and are difficult to imitate, thus, lessening potential
competitors.
b) The structure and system of the organization are appropriate
and adequate to allow them to attaining competitive
advantage.
c) The people in the organization are working deliberately toward
creating competitive advantage.
d) There are no easy substitutes to complete with the
organization’s products
There are different types of resources and capabilities. They can
be classified as tangible and intangible assets. Tangible assets
refer to physical resources like buildings, facilities, equipment, and
location, and financial resources like cash flow, balance sheet,
credit ratings, and financial performance. Intangible assets refer to
management and technology resources like highly performing
people, transformation leadership styles, global and local
branding, intellectual property, trademarks and others.